The Bank for International Settlements has warned the impending US rate hike may harm emerging economies, and says the financial markets are experiencing an ‘uneasy calm’ in anticipation of Federal Reserve’s decision later this month.

The U.S. interest rate hike will be the first in almost a decade, and is widely expected later this month. The Bank for International Settlements said in its latest report that, in the bond market, “a number of anomalies suggest that all is not well,” with Claudio Borio, the head of the monetary and economic department at BIS warning that the amount of bad loans in the eurozone is “too high”.

It continued to say that a rate hike may have a negative impact on emerging economies because of their “Less favourable financial market conditions” and “increased sensitivity to US interest rates”.

Speculation of a US rate rise has been steadily increasing since the summer, but the Federal Reserve’s Federal Open Market Committee has continued to keep US interest rates unchanged at record lows of 0% to 0.25%, where they have been since 2008. However, many analysts are expecting their meeting on 15-16 December to be the one to finally hike rates, after a spate of positive economic data for the US.

07/12/2015